1. Company Info–Write a brief description of the companies, its industry, its products, and its markets.
Industry Analysis
What are the major trends and issues facing your industry? Discuss both challenges and
opportunities:
o Market concentration – market shares
o Highly concentrated or lots of small players
o Trends
o Pricing, volume, growth
o Profit margins
o Who’s growing, who’s shrinking?
o Disruption / new products?
o Barriers to entry
o Prepare comparable analysis spreadsheet
o Anything else that’s important to know
Business Analysis
What are the major issues facing the company. Discuss positives and negatives of the company
as it relates to its industry and the current environment. How do the companies’ financial
statements reflect these issues?
o Business model / strategy
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o Comparison of company to others in industry
o Relative strengths and weaknesses
o Market share
o Cost of production
o Trends
o Volume, pricing, appropriate metrics
o Capital spending needs
o Disruptive forces
o What are they doing to compete?
o Major events / issues
o Anything else that’s important to know.
2. Company News–Search for and report on at least two major events that have affected each
company’s performance over the past year.
3. Stock Market Activity–Describe the companies’ market activity over the past three years.
Resources include, but are not limited to: http://money.msn.com, http://finance.yahoo.com,
http://google.com/finance.
4. Financial Statement Analysis–Prepare & analyze a) condensed, b) trend, and c) common-size
financial statements for all companies for a three-year span (current year, and two prior years).
Note: Gather the financial information from each company’s 10Ks (www.sec.gov).
a) condensed balance sheet, condensed income statement, & condensed statement of cash flows.
b) trend analysis balance sheet, trend analysis income statement, & trend analysis cash flows. Create
the trend financial statements using Excel formulas that reference the condensed financial statements.
c) common-size balance sheet, common-size income statement, and common-size statement of cash
flows.
Note: Create the common-size financial statements using excel formulas that reference the condensed
financial statements.
Comment on the trends in the growth of assets, liabilities, and stockholders’ equity and overall financial
risk.
Comment on the trends in the growth of revenue, cost of goods sold, expenses, and overall profitability.
Comment on the trends in the growth of operating, investing, and financing activities, and the overall
cash position.
5. Ratio Analysis–Compute financial statement ratios for both companies for a three-year span
(current year, and two prior years), AND compare to industry norms (Time Series (Trend) Analysis &
Cross-Sectional Analysis). Show all formulas used to calculate the following ratios:
Profitability:
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Gross Profit Margin
EBITDA Margin
Net Profit Margin
Return on Assets
Return on Equity
DuPont Analysis of ROE
Earnings Per Share (EPS)
Efficiency:
Asset Turnover
Accounts Receivable Turnover
Accounts Receivable in Days
Inventory Turnover
Inventory Days
Liquidity:
Current Ratio
Quick Ratio
Cash Flow Liquidity
Solvency:
Debt/EBITDA
Debt Ratio
Times-Interest-Earned
(EBITDA-Capex)/Interest Expense
Free Cash Flow
Cash Flow Adequacy
Future financing needs: Debt maturities, capital spending
Capital Structure
Types of debt, equity
Valuation:
Trailing and forward Price Earnings (P/E)
Dividend Rate per share / Dividend yield
EV/EBITDA
FCF Yield
Compare the three years of ratio information for each company. What do these ratios say about
profitability, efficiency, liquidity, solvency, and investment? Indicate which ratio is stronger/weaker,
quicker/slower, more/less liquid, or more/less risk.
Note: Industry norms (average) info can be found at money.msn.com, finance.yahoo.com,
csimarket.com.
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What does your analysis of these ratios say about profitability, efficiency, liquidity, solvency, and
investment as compared to their competitors?
6. Research Summary- would you advise that others invest in one and/or both of these companies both
from an equity and a credit point of view? Prepare a written summary of your analysis and investment
recommendation and provide a minimum of five significant points based on research, analysis, & sound
reasoning.
General Info:
Include excel spreadsheets, graphs, charts, and other items to your paper to enhance the overall project.
16-20 Page Paper (for the group) —Type double-spaced, using a 12-point Times New Roman font.
Cite all sources and include a bibliography.
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